WTI and Brent Crude OIl

Trader Reaction to $78.58 Sets the Tone for March WTI Crude Oil Futures

U.S. West Texas Intermediate crude oil futures are inching higher on Tuesday as some oil producers continued to struggle to beef up output. A weaker U.S. Dollar is also helping to drive demand for the dollar-denominated asset.

Although some claim the recent price declines have been driven by worries about soaring cases of COVID-19 around the world potentially sapping fuel demand, others have said tight supply from OPEC, Russia and allies, together called OPEC+, not keeping up with demand was also supporting prices. This could lead to a short-term rangebound trade.

At 06:22 GMT, March WTI crude oil is trading $78.27, up $0.57 or +0.73%. On Monday, the United States Oil Fund ETF (USO) settled at $56.16, down $0.51 or -0.90%.

Daily March WTI Crude Oil

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart, however, momentum turned lower on Monday when sellers confirmed the previous session’s closing price reversal top.

A trade through $79.82 will negate the closing price reversal top and signal a resumption of the uptrend. A move through $74.01 will change the main trend to down.

The minor range is $74.01 to $79.82. Its 50% level at $76.92 is the nearest support. Since the main trend is up, buyers could come in on the first test of this level. If it fails then look for an acceleration to the downside.

The major retracement zone at $73.59 to $71.39 is the support zone controlling the near-term direction of the market.

Daily Swing Chart Technical Forecast

The direction of the March WTI crude oil futures contract on Tuesday is likely to be determined by trader reaction to $78.58.

Bullish Scenario

A sustained move over $78.58 will indicate the presence of buyers. If this move creates enough upside momentum then look for a possible surge into $79.82.

Taking out $79.82 will reaffirm the uptrend and shift momentum to the upside. This could extend the rally into the October 26 main top at $80.72.

Bearish Scenario

A sustained move under $78.58 will signal the presence of sellers. Crossing to the weak side of the former top at $77.85 will indicate the selling pressure is getting stronger. This could trigger a further break into the pivot at $76.92.

Watch for a technical bounce on the first test of $76.92. If it fails, however, we could see the start of an acceleration to the downside with $74.01 a short-term target.

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Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.